MARKET SNAPSHOT: Investors Are Increasingly Looking For That Overdue Selloff In Stocks
By Wallace Witkowski, MarketWatch
S&P 500 on longest streak without 5% pullback in more than a decade
Investors who have been looking for a big pullback in stocks to scoop up some bargains have been waiting a long time, and they may be waiting even longer to jump into that opportunistic drop if the current trend holds.
Stocks finished higher for the week on Friday as the Dow Jones Industrial Average ended up less than 0.1%, the S&P 500 index gained 0.2%, and the Nasdaq Composite Index rose 0.7%.
A lot of market participants are waiting for that big 5% drop in stocks, seeing it as a buying opportunity, said Robert Pavlik, chief market strategist at Boston Private Wealth. The problem is that those kinds of selloffs have proved elusive as stocks have managed to grind higher.
So far, the S&P 500 has grinded higher for 182 trading days without a 5% pullback, the longest such streak since Feb. 11, 2004, according to Dow Jones data. Over those 182 days, the S&P 500 has gained nearly 19%.
The last time the S&P 500 had a 5% pullback was June 27, 2016, when the index fell 5.6% over a period of 13 sessions. Before that, the index dropped 13.3% from Nov. 3, 2015, to Feb. 11, 2016, or over a period of 68 sessions.
"People are hesitant to get in," Pavlik said. "They're looking for the pullback but that hasn't happened. Every time there's selling, the market consolidates and it grows again."
Since the start of the bull market -- not counting the current run of trading days without a pullback of 5% or more -- the S&P 500 has averaged going about 56 sessions before it pulls back 5% or more, based on Dow Jones data.
S&P selloffs (5% or more) for current bull market (Source: Dow Jones)
Date selloff ended % decline at end of selloff Bullish days before selloff began
06/12/2009 5.4% 2
07/10/2009 7.1% 52
10/30/2009 5.6% 70
02/08/2010 8.1% 53
05/07/2010 8.7% 52
06/07/2010 10.3% 3
07/02/2010 8.5% 9
08/26/2010 7.1% 25
03/16/2011 6.4% 122
06/15/2011 7.2% 31
08/08/2011 17.3% 15
08/19/2011 6.7% 5
09/09/2011 5.3% 8
10/03/2011 9.6% 5
11/25/2011 9.8% 19
06/01/2012 9.9% 87
11/15/2012 7.7% 73
06/24/2013 5.8% 127
02/03/2014 5.8% 142
10/15/2014 7.4% 158
08/25/2015 12.4% 150
09/28/2015 5.7% 15
02/11/2016 13.3% 26
06/27/2016 5.6% 81
If a 5% selloff is asking too much to find an entry point, even a modest decline has been hard to come by as both the Dow industrials and S&P 500 have gone 108 sessions with a decline of 1% or more .
With the Fed having already raised interest rates, and forecasting another two hikes this year based on economic strength, Pavlik said it's going to take some extraordinary catalyst in the near future to trigger a selloff, where the herd mentality kicks in and traders realize that repeated selling pressure is spurring more profit-taking than it is opportunistic buying.
With little economic data and only a few major earnings reports from companies like Nike Inc.(>> Nike Inc) and FedEx Corp.(>> FedEx Corporation) on tap in the coming week, there are few short-term catalysts for stocks until first-quarter earnings season kicks into gear.
Following the Fed's decision to resume rate increases, a few Fed speakers this week could dictate the direction of stocks, but nothing that would trigger a major selloff that could be construed as a buying opportunity, Pavlik said.
On Monday, Chicago Fed President Charles Evans, a voting member, speaks. Voting-member New York Fed President William Dudley is then scheduled to speak on Tuesday.
On Thursday, Fed Chairwoman Janet Yellen will deliver opening remarks at Fed community development research conference in Washington, while Minneapolis Fed President Neel Kashkari, the sole dissenter for raising rates at the past week's meeting , will also speak in Washington, D.C. Also, voting member Dallas Fed President Rob Kaplan will deliver a speech on the economy to the Chicago Council on Global Affairs.